Estate Planning Document Advice

Utah estate planning takes many different forms, depending on the consumer's needs and knowledge base, as well as the expertise and know-how of the attorney involved. For many families, estate planning is a simple correction in life insurance beneficiary designations. In others, it can be as complicated as multiple business and trust instruments to avoid a high estate tax rate. Regardless of the level of planning needed in any given situation, the problem remains the same: How can a consumer differentiate an overly-expensive plan from a plan that lacks the depth to contemplate their basic needs?

An estate plan can range in price from $50 up to tens of thousands of dollars, depending on what is needed. Many online do-it-yourself living trust services cost a few hundred dollars or less, while a law firm may charge $10,000 or more for any clients in need of estate tax planning. The question remains, which service should the consumer choose? The three main factors to help in this decision pertain to the consumer's need for expertise, the gaps in efficiency between different providers, and the level of customization required.

The Need for Expertise - Law Firms Win

Estate planning is not rocket science or brain surgery, but there are several moving parts and contingencies. In addition to distribution of assets, a properly-structured estate plan accounts for changing family dynamics, changing asset structures, access to public benefits, dispute mitigation, and other factors. Further, there are many options available to consumers that they may not even know exist.

At most law firms providing estate planning services, the expertise to skillfully handle an estate matter is not in question. Some attorneys can become complacent in their research over time, but this can be easily-vetted through viewing their publication history.

Do-it-yourself options, on the other hand, often fall short in this regard. Demographic surveys that generate an estate plan rarely if ever have the capacity to account for family dynamics, blended family scenarios, and the unique difficulties facing business owners in estate planning.

Efficiency Gaps - Law Firms Lose

Historically, estate planning could be very expensive due to an attorney's drafting fees. With the technological advancements of the computer and internet age, estate planning has become much more accessible through software automation. For example, most 'complex' trusts drafted in the 1980s could be drafted by a basic estate planning computer program within 15 minutes of data entry. This has allowed a much greater level of customization and multi-dimensional planning at an affordable rate.

However, many law firms have not updated their systems or software in years. Some firms use basic templates that have been in the archives for decades, while other firms draft every document from scratch. Ultimately, the consumer bears the costs of inefficiency.

Most online do-it-yourself programs can generate a basic estate plan within minutes for a customer completing a demographic and preference survey. However, while these plans seem to be cost-effective in the drafting phase, a poorly-structured plan can fall apart and cost a family tens of thousands of dollars in legal fees to clean-up the damage caused by ineffective planning. Customization is key to any effective estate plan.

Level of Customization - Varies Greatly

The degree to which any estate plan will be effective hinges on that plan's ability to account for the family, the assets, and the situation at any given time. Do-it-yourself systems consistently fail in this regard. While they may work if one were to take a snapshot of the estate planning situation at the time of the drafting. they rarely account for any substantial changes in the life of the consumer.

Sadly, a consumer's ability to discern whether an attorney-drafted plan will adapt to new circumstances is nearly impossible. Some attorneys may simply change some names on a generic template found online, while others will draft every word from scratch. Still more may rely solely on a software package to draft an estate plan, while others will use the software as a starting point in an hours-long customization process.

As with assessing an attorney's expertise, an attorney's tendency to truly customize an estate plan may be easily assessed by determining whether that attorney takes pride in his or her work through publications. Most estate planning attorneys that truly focus on that practice area tend to publish articles fairly regularly.

At Middle Class Estate Plans, we pride ourselves on the level of expertise and customization we deliver to our clients. Through our innovative client participation system, we are also able to deliver one of the most cost-effective ways for middle class families to plan for their loved ones. You can find out more about our client participation system at the link here.

As Valentine's Day approaches, so does spring and the wedding season. One too-often-forgotten step in marriage is a prenuptial agreement. While most people entering a first marriage have no use for a prenuptial agreement, there is a good reason why everyone entering a marriage who already has children needs one.

Spousal Rights in Inheritance

In Utah, if a married person with children from a prior relationship dies without a Will, the surviving spouse is entitled to the first $75,000 of the estate (adjusted for 2009 dollar value) plus half of the remainder. The children from the prior marriage only receive the other half of that remainder.

Even if this person's Will or Trust states that everything goes to their children, the spouse is still entitled to a spousal elective share, which amounts to roughly 1/3 of the estate, depending on which assets are exempted.

This amount is a floor and not a ceiling, so you can leave as much as you want to your spouse without a problem. However, if the goal is to leave everything to your children, your hands are tied.

Where a Prenuptial Agreement comes in

​A prenuptial agreement is a simple document wherein each side entering into a marriage discloses their assets and debts, as well as agrees to certain rules regarding those assets. This is the simplest way to waive that spousal share upon death.

Many couples choose to leave something to their spouse after death, but a valid prenuptial agreement is the simplest way to ensure that their hands are not tied in leaving assets to the children that they bring to the marriage.

If you or a friend are looking at remarrying this year, take a look into a prenuptial agreement to protect the children's rights in inheritance and to simplify the estate plan going forward.

Trusts are, by default, revocable. A trust is only irrevocable if its terms expressly state so. If a trust provides for revocation procedures, a settlor may revoke by complying with those provisions. If the trust does not state a revocation procedure, the settlor may amend or revoke by any method manifesting “clear and convincing evidence” of the settlor’s intent to revoke or amend, especially by executing a Will or codicil stating so.

Trusts funded by more than one settlor may be revoked and amended by any settlor to the extent that the settlor contributed to the trust. If the contributors were spouses and the trust was community property, the trust may be amended by joint action of both spouses, or revoked by one spouse acting alone.

During the revocable period, the trustee’s duties are owed exclusively to the settlor, and not to the beneficiaries.

This article is informational and does not contain legal advice. If you would like to ensure your property is distributed according to your wishes, please seek advice from an estate planning professional.

Every trust needs a trustee. For most revocable trusts, you (or you and your spouse jointly) will serve as the trustee during lifetime. However, choosing a successor trustee can be a difficult decision. This article will discuss some of the main factors to consider in choosing a successor trustee.

Carrying Out Your Wishes

One of the main roles of a trustee is ensuring that your wishes are put into effect. Since trustees may often face opposition from family or friends wanting to receive or distribute assets on their own terms, a trustee must be bold and willing to carry out your wishes regardless of external pressures.

Discretion and Judgment

When leaving assets to children or otherwise young or needy beneficiaries, a properly-drafted trust will normally leave some discretion to the trustee regarding distributions for healthcare costs, educational expenses, and daily maintenance and support. In this regard, you are truly putting your loved ones' futures in the hands of the trustee. Make sure that your trustee has the tact, discretion, and judgment skills necessary to provide for your loved ones without squandering their finances or spoiling them.

Financial Savvy

Unless waived in the trust document, trustees have a duty to manage trusts funds as a "prudent investor" would. That simply means that the trustee has a duty to invest trust money in appropriate investments with a reasonable level of diversification. Choose a trustee that will appropriately invest undistributed trust funds in a way that facilitates appropriate growth.

Paid vs. Unpaid

Finally, your trustee's compensation can significantly complicate your plan. If you want a professional trustee, you will need to provide compensation. However, compensation for family or friend trustees may be waived, so long as the trustee is willing to work pro bono. Few complications arise when a family member or friend serves as trustee without payment, but compensation for a friend or family member can complicate the administration of the trust.

One of these complications is the 'reasonableness' of the fee. If the trustee normally earns $100/hour in their day job, trust administration billed at the same rate may cause an undue burden on the trust. On the other hand, if the trustee normally earns $10/hour but charges the trust $40/hour for trust administration, then there may be an inappropriate incentive to complicate the administration.

The second major complication with paid trustees is the family dynamic. It's sad to see family relationships strained because trust beneficiaries interpret a family member's trust administration compensation as self-serving. For this reason, I generally recommend family members serve as trustees without compensation, which brings us to our final factor to consider:

Family, Friend, or Commercial Trustee?

In general, family members and friends are perfect inexpensive options for trustees, so long as they match all of the other criteria discussed above. However, certain situations call for commercial trustees. For example, special needs trusts (trusts ensuring supplemental care for persons on government assistance) have special administrative requirements that may be too much for a non-professional to adequately maintain. Other family dynamics simply would not allow for a family or friend to serve as a trustee. In these situations, an institutional trustee (bank or financial services company) or a private professional trustee may be a better option than a family member.

In conclusion, these 5 factors are some of the most important ones to consider in choosing a successor trustee. When in doubt, discuss your options with your estate planning counsel and consider their suggestions based on your situation and their expertise.

This article is informational and does not contain legal advice. If you would like to ensure your property is distributed according to your wishes, please seek advice from an estate planning professional.

Trusts, or parts of trusts, may terminate under any of the following conditions:

The trust or part of the trust is revoked;

The trust or part of the trust expires pursuant to its terms;

No trust purpose remains to be achieved; or

The trust purposes have become unlawful, contrary to public policy, or impossible to achieve.

Further, trustees or beneficiaries may commence proceedings to modify or terminate trusts in the following circumstances:

If the trust is a noncharitable irrevocable trust, by consent of settlor and all beneficiaries.

This proceeding may also be commenced by a settlor.

If the trust is a noncharitable irrevocable trust, by consent of all beneficiaries if a termination would not be inconsistent with any material purpose of the trust, or if a modification would not be inconsistent with a material purpose of the trust.

This proceeding may also be commenced by a settlor.

If modification or termination would further the purposes of the trust because of circumstances not anticipated by the settlor. Modifications must be in accordance with the settlor’s probable intentions, to the extent practicable.

If, without modification of the trust’s administrative terms, continuation of the trust according to its terms would be impracticable, wasteful, or impair the trust’s administration.

If a charitable trust does not otherwise fail in whole or in part and does not revert to the settlor, and a particular charitable purpose becomes unlawful, impracticable, impossible to achieve or wasteful, then the court may modify or terminate the trust by directing a different distribution consistent with the settlor’s charitable purposes. The court cannot order these distributions if the trust provides for the property to revert to a noncharitable purpose, so long as the property is to revert to the still-living settlor, or if it has been fewer than 21 years since the trust’s creation.

This proceeding may also be commenced by a settlor.

If the trust has fewer than $100,000 in assets, a trustee may terminate the trust after notice to the beneficiaries if it concludes that the trust’s value is insufficient to justify administration costs. A court may also modify or terminate the trust or remove or replace the trustee if it deems the trust value too low to justify administration costs.

If the court determines that the settlor’s intent and the trust terms were affected by a mistake of fact or law, it may reform terms of a trust to conform to the settlor’s intention, even if the terms are unambiguous.

The court may modify a trust’s terms, even retroactively, to achieve the settlor’s tax objectives.

Trustees may combine two or more trusts into a single trust, or divide a trust into two or more separate trusts, after notice to beneficiaries, as long as the result does not impair the beneficiaries’ rights or adversely affect the purposes of the trust.

This article is informational and does not contain legal advice. If you would like to ensure your property is distributed according to your wishes, please seek advice from an estate planning professional.

There are several ways to revoke a Will in Utah, but some changes in circumstances may lead you to inadvertently render it ineffective as well.

The most effective way to revoke a Will is to execute a new Will that expressly revokes "all previously Wills or Codicils heretofore executed by me," or using similar language. After that point, you should destroy all copies of the old Will and make sure everybody involved in your estate plan knows about the new Will.

Another way to revoke a Will is through inconsistency. If your new Will completely disposes of your estate, then your old Will is revoked by this method. If the new Will does not dispose of the entire estate, then the new Will is viewed as a supplement to the old Will. For obvious reasons, this method has its downsides and is rarely, if ever, recommended by professionals.

If you are not executing a new instrument, then you can revoke a will through actions. This has do be done intentionally, for the purpose of revoking the Will, and by burning, tearing, or otherwise destroying the Will. If this is how you plan to revoke a Will, I suggest you do so in front of several witnesses, and that you destroy all copies as well.

Finally, a change in circumstances can void your Will as it applies to one person. One of these situations involves someone who intentionally killed the deceased. If the Will of the deceased left something to the killer, then that portion of the Will is considered revoked.

The other circumstance that negates a portion of a Will involves marriage and divorce. If your spouse is mentioned in your Will, and you later divorce, those provisions are generally considered revoked. Likewise, if you write a Will and later marry, your Will remains effective, but the new spouse can negate the Will as it applies to them, effectively leaving half or all of the estate to them.

Most people want to make sure that their children don't fight over any inheritance that they might receive. One way to help disincentivize estate litigation is through a no-contest clause. Also known as Penalty Clauses, no-contest clauses are often included in Wills as a way to deter bickering and frivolous litigation between beneficiaries.

These clauses state that if anyone contests the Will or otherwise institutes court proceedings relating to the estate, then they will be penalized (usually by disinheritance). These provisions are generally enforceable, unless the person instituting the proceedings or contesting the Will had probable cause in doing so. Probable cause is an abstract concept, but usually applies if there is implied coercion in the Will drafting, or some kind of conflict of interest.

An example is provided below to provide some context:

Jim is aging and becoming more forgetful, so he executes a Will. Shortly thereafter, Jim is diagnosed with dementia. He dies of a stroke one month after his diagnosis. After his funeral, his children gather and read his Will. They find that they are to split 1/3 of his estate, with 2/3 of his estate being distributed to Jim’s attorney. The Will has a no-contest clause, which disinherits any person who contests the Will. One of the children contests the Will anyway, claiming undue influence and/or fraud on the part of the attorney. The court finds in favor of the child. Because the court also found that the child had probable cause in bringing the Will contest action to the court, they will not enforce the no-contest clause, and the child will still benefit from his father’s estate.

Whether you want to make sure your Will is not contested, or to find out whether you should contest a Will, you will want to seek professional advice. You can reach us anytime at (435) 572-0807 or at office@mellinglaw.com.

This article is informational and does not contain legal advice. If you would like to ensure your property is distributed according to your wishes, please seek advice form an estate planning professional.

Have you ever wondered how to leave heirlooms to loved ones without causing a fight? There are several ways to go about this, but some are better than others.

Gifts during life

First, you can simply give antiques or heirlooms to whomever you wish. This ensures that the intended recipient actually receives the gift you want to give them. However, if the items are valuable (usually over $14,000), then you may want to consult with a tax specialist to determine whether any gift taxes will come into play.

In a Last Will and Testament

If you do not want to part with your belongings during your lifetime, then you can leave them to someone in your Will. Your Will can dispose of specific items of personal property or simply outline the process whereby your heirs will divide your property amongst themselves. However, if you leave specific items to named persons in your Will, then you would need to formally update your Will to make changes in the future.

In a Personal Property Memorandum

The Utah Uniform Probate Code allows you to include a clause in your Will stating that you want your estate to be bound to distribute specific items of personal property according to a document called a Personal Property Memorandum.

The real advantage of a personal property memorandum is its flexibility. It can be edited freely without needing to rewrite or amend the Will itself. The only requirements for the memorandum are that it must be referenced in the Will, signed by you, and describe the items designated with ‘reasonable certainty.’

One drawback of the personal property memorandum is that it cannot dispose of real estate or intangible assets like bank accounts and investment products

This article is informational and does not contain legal advice. If you would like to ensure your property is distributed according to your wishes, please seek advice form an estate planning professional.

As humans, it is in our nature to procrastinate, especially when contemplating our own mortality. Too often, people forget or delay writing a Will until death is imminent. While someone may certainly execute a Will as their last Will, Testament, and act in this life, such deathbed Wills may be contested due to improper execution or lack of mental capacity. Last week, we talked about the requirements of a properly-executed Will, but this week we will discuss the mental capacity aspect of Wills and why a Will is not something you want to put off until the last minute.

Who can write a Will?

According to the Utah Probate Code, the requirement for writing a Will is anyone who is “18 or more years of age [and] of sound mind.” The age requirement is straightforward. However, the “sound mind” requirement is a little more complicated.

Mental Capacity Requirements

Everybody makes decisions on a daily basis. These decisions range in difficulty from which movie to watch to issuing ownership shares of a company. When a decision is affected by the law in some way, a certain level of mental capacity is required to render that decision legally binding. The mental capacity required varies widely. The graphic below shows the relationship between the mental capacity required to make different actions binding. A larger circle requires a larger understanding. As you can see, making a Will has a lower mental capacity requirement than some other legal actions.

The purpose of requiring a lower standard of mental capacity for making a Will is to help people effect their wishes. A testator does not need to understand everything about estate planning, taxes, interest, property transactions, or business succession. The testator only needs to ‘know the objects of his bounty,’ understand the nature of the property, and have the ability to instruct how those assets should be distributed.

Does that mean that my Grandmother with Dementia can still write a Will?

Not so fast. Just because there is a lower standard on capacity for Wills does not make it an automatic affair. Capacity can always be challenged by heirs, so there are some guidelines to follow:

- Use an attorney's experience and expertise in drafting a Will. - If you are over the age of 65, meet with your primary care physician to talk about your health in general before seeing an attorney about a Will.
- For anyone with early-stage dementia, Alzheimer's disease, or any other condition affecting their mental capacity, a doctor and attorney should be working in concert to ensure the proper drafting of the Will and to make it binding.

What is a Will really? Is it a written statement of your wishes drafted on your deathbed? Is it a form you can print online? Today, we will discuss what a Will is, what a Will isn't, and what a Will should be.

What are the Legal Requirements of a Will?

A Will is a document expressing the wishes of a testator (anyone dying with a Will in place) pertaining to the distribution of the testator’s property after death. A Will generally must be:

1. In writing;
2. Signed by the testator in the testator’s name (or by another at the direction and in the presence of the testator); and
3. Signed by two witnesses of the testator’s signing of the Will
(The witnesses may instead witness the testator’s acknowledgment of the signature, or the testator’s acknowledgment of the Will itself, in lieu of witnessing the signature itself.)

Can I Write my own Will?

If a Will does not meet the requirements mentioned above, it may still be considered a holographic Will, even without witnesses, so long as the signature and 'material portions' of the Will are in the testator’s handwriting. This is a gray area where you do not want to venture. Holographic Wills are recognized by the state of Utah, but those who write their own Will without advice may have a higher likelihood of an expensive Will contest. After an expensive appeal process, the Supreme Court of Utah in one case refused to acknowledge a holographic Will that had been written on a series of unpaginated and unbound notecards. (In re Estate of Erickson, 806 P.2d 1186 (Utah 1991)).

If you absolutely must write a holographic Will, please write the entire thing on one page entirely in your own handwriting, but I have seen even these Wills questioned. Issues such as spousal inheritance rights, inheritance for minor or disabled children, and distribution of retirement accounts often go unaddressed, and lead to problems for the executor of estates distributed according to handwritten Wills.

What Should my Will Look Like?

An ideal Will is something completely typed, witnessed, and accompanied by a self-proving affidavit (notarized statement that witnesses agree that testator had the mental capacity necessary to execute a Will). If you really want to, you can type it yourself or print a sample online, but these often cause problems such as those accompanying handwritten Wills. A Will drafted by an estate planning attorney will take into consideration issues such as needs of minor children, blended family issues, nonprobate assets, and family dynamics.

Too often, Wills are pieces of paper that help people sleep at night, but keep their children awake in the months after their passing because the Will was poorly-drafted and caused more problems than it intended to solve. A properly-drafted Will is a plan that remains effective after your passing and lets your children focus on the transition to life without a parent rather than losing sleep over a messy transfer of their parent's wealth.

Call us today for a free consultation about your family's goals and options going forward.